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Wall St. Scion Gets 4 Years in Prison for Fraud

Andrew Caspersen leaving court in March. Many of those he defrauded were relatives and friends. A doctor testified that Mr. Caspersen’s need to trade stock options was no different from a mental illness.Credit
Lucas Jackson/Reuters

Andrew Caspersen, the disgraced scion of a wealthy Wall Street family, was sentenced on Friday to four years in prison for robbing his friends, family members and a large hedge fund foundation in a Ponzi-like scheme.

Mr. Caspersen, 40, who pleaded guilty this summer, had sought to lessen his sentence by arguing he suffers from a severe gambling addiction that compelled him to make high-stake trades in the options market.

In an unusual move before imposing sentence, Judge Jed S. Rakoff of Federal District Court in Manhattan allowed Mr. Caspersen’s lawyer to take testimony from Dr. Marc Potenza, a professor of psychiatry at Yale University School of Medicine, and an expert on gambling addiction.

The lawyer, Paul Shechtman, had included in a court filing a letter from Dr. Potenza, arguing for a lenient sentence. In that letter, Dr. Potenza, who evaluated Mr. Caspersen, said his compulsion to trade stock options was no different from a mental illness.

Federal prosecutors had wanted a particularly stiff sentence for Mr. Caspersen — arguing that a prison term of just over 15 years was warranted in light of the magnitude of the theft; he stole nearly $40 million from people close to him and a big hedge fund foundation.

Federal authorities argued that Mr. Caspersen would have taken in tens of millions of dollars more from potential victims if not for his arrest in March at La Guardia Airport.

The United States attorney in Manhattan, Preet Bharara, said: “Using his Wall Street pedigree, Andrew Caspersen deceived and defrauded investors — including his own family and friends and a charity — out of tens of millions of dollars.” Mr. Caspersen’s deception involved “made-up private equity ventures, fake mail addresses and fictional financiers,” Mr. Bharara said. “Caspersen has admitted to his crimes and has now been sentenced to time in federal prison.”

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The tough sentence urged by prosecutors was roughly twice as long as the seven-year sentence recommended by the probation department for the federal courts.

Judge Rakoff is a well-known critic of federal sentencing guidelines, which often suggest long prison terms for a defendant that can limit a jurist’s ability to consider mitigating circumstances.

Most of Mr. Caspersen’s victims were family members and friends. Many were fleeced out of a few million dollars for fraudulent investment schemes devised by the former Wall Street executive. His single biggest victim was the charitable foundation tied to the hedge fund led by Louis Bacon, which gave nearly $25 million to one of Mr. Caspersen’s schemes.

Mr. Caspersen, who is married with two young children, often persuaded people to invest with him by letting his victims believe his fraudulent deals were among the legitimate investment deals he was working on at the Park Hill Group, a division of PJT Partners.

Over the years, Mr. Caspersen’s trading in the stock market was characterized by big swings — sometimes he would lose millions and other times he would score big gains. In February, he made so much money trading stock options that he could have paid back everyone and still had as much as $60 million left over for himself.

Instead, he continued to trade, losing it all. About a month later he was arrested returning from a family vacation.

A version of this article appears in print on November 5, 2016, on Page B3 of the New York edition with the headline: Wall St. Scion Gets 4 Years in Prison for Ponzi-Like Fraud. Order Reprints|Today's Paper|Subscribe